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Major nations could face economic sanctions over Iran oil buys

March 20, 2012 | 5:28
pm

REPORTING FROM WASHINGTON -- The United States may impose tough economic sanctions against India, China, South Korea and Turkey for their imports of Iranian oil despite months of negotiations with U.S. officials, the State Department announced Tuesday.

Japan and 10 European countries have reduced their purchases of Iranian oil sufficiently to win waivers from any U.S. punishments. But the four major nations and eight others that buy Iranian oil have not cut back “significantly,” as a 2011 law requires, a senior State Department official said. The deadline is June 28.

The strictures would bar companies based in those countries from any dealings with the U.S. financial system. They are the most powerful sanctions yet imposed in an effort to pressure Iran to curtail its nuclear program, which many countries fear is aimed at a weapons building capability.

President Obama is due to arrive in South Korea on Sunday for a nuclear security summit and is scheduled to hold meetings with leaders of China, Turkey, South Korea, Russia and others.

Some members of Congress, Israeli officials and other advocates of tough action have been waiting to see whether the Obama administration would aggressively implement the sanctions law. The initial reaction was mixed.

One senior Senate aide, who spoke on condition of anonymity when discussing sensitive negotiations, described the approach as “overall, a reasonable move.... This will really ratchet up the pressure on those [countries] that are continuing to engage in these transactions.”

Another Senate aide questioned whether the administration’s standard met the requirements of the law, because Japan apparently has been rewarded for cuts made last year, rather than in the first half of 2012.

“If this is a get-out-of-jail-free card issued on the basis of past performance alone, this is not a faithful adherence to the law,” said the aide, who declined to be identified because he was not authorized to speak.

Administration officials highlighted Japan as an example of a country paring its dependence on Iranian oil despite a need for new sources of energy since the Fukushima Daiichi nuclear power plant disaster last March. Experts estimate that Japan cut its purchases of Iranian oil by 22%, up from 15%, in the second half of last year.

“Under great hardship the Japanese have understood the commitments to reduce the imports of Iranian crude oil and took these actions,” the senior State Department official said.

The European Union halted all new contracts for Iranian oil when it adopted an embargo in January. Greece, Spain, Italy, Belgium, the Czech Republic, France, Germany, the Netherlands, Poland and Britain have all purchased Iranian oil in the past.

Mark Dubowitz of the Foundation for Defense of Democracies, a pro-sanctions group, said the administration’s approach would help reassure nervous oil markets by showing that Japan can continue to make limited purchases of Iranian oil.

The administration’s goal is to persuade major purchasers to cut their contracts by sizable amounts, while pushing other countries to demand deep price discounts due to lower demand. Saudi Arabia has signed agreements with Iran’s customers to provide its oil as a substitute.

Dubowitz predicted that the cuts and discounted prices would reduce Tehran’s foreign earnings from oil exports by 20% to 30%.